UPSC Prelims 2014— Question 53

Correct answer: Option A. Statutory reserve requirements such as CRR and SLR are monetary and prudential instruments. They help the central bank influence banks' capacity to create credit and provide liquidity/safety buffers. They are not designed primarily to prevent banks from making profits, nor simply to force a particular amount of vault cash for daily operations. Thus statement 1 is the valid purpose among those listed. Option A: Correct. This option is consistent with the governing fact or the valid combination identified in the question. The option reads: “1 only” Option B: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “1 and 2 only” Option C: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “2 and 3 only” Option D: Incorrect. This option does not match the verified answer because its proposition, location, institution, sequence, or combination conflicts with the relevant fact tested in the question. The option reads: “1, 2, 3 and 4” The key Prelims lesson is to test each proposition independently before selecting the combination. Where the question uses words such as 'only', 'all', 'none', 'always' or a precise institutional/geographical association, a single inaccurate component is sufficient to eliminate the option. The answer recorded here follows the official answer key for the question-paper series represented by the uploaded source and has been cross-checked against an independent published key. The explanation is intended for conceptual revision rather than as a reproduction of any third-party solution.